u can resize any partitions and make linux install partition symbolized as "/"
a slash of size >7GB.make another small partition of type swap of 300MB or 500MB depending on ur available RAM.if u got 1 gig of ram a 300MB swap suffice.
the installer will show u these partitions as free space and select "manual partn" in installer.yes,u shud make space for the Linux installation first.
afaik there is no need to reinstall xp.grub bootloader will show windows xp entry too in boot menu.it works.